An arbitrator sided with SciClone Pharmaceuticals in its proceedingswith Alpha 1 Biomedicals Inc., giving SciClone the right tomanufacture Zadaxin thymosin alpha 1 in its terrotories.The ruling, which came late on Friday, said Alpha 1 breached itsobligation as sole supplier to provide SciClone with commercialquantities of the drug. Now SciClone, of San Mateo, Calif., can seekother manufacturers of the drug.SciClone wanted to launch the product in March in Singapore, where itwas approved in September for treating chronic hepatitis B infection.In September, Alpha 1 lined up Belgian company UCB Bioproducts toproduce bulk thymosin alpha 1, and have it delivered to SciClone inDecember. But a production snag in the Belgian plant put deliverybehind schedule.The arbitrator, who held the hearing from Feb. 2 to 12, also ruledagainst Alpha 1 of Bethesda, Md., in its claim that it was entitled to ahigher sales price and royalties under an amended agreement.Still to be resolved by arbitration is a separate set of issues involvingSciClone's claim for damages and its request for an exclusive royalty-free, paid-up license to sell the product in its territories, which includeeverywhere but the U.S., Canada, Europe, Israel and Korea. Thesecond round of arbitration is set to begin April 25.The royalty share at stake is 25 percent of SciClone's net operatingprofit from the drug. Michelle Slade, corporate communicationsmanager for SciClone, told BioWorld that while pricing decisions havenot been made, there are 100,000 people in Singapore infected withchronic hepatitis B. And about 90 percent of the 300 million carriers ofhepatitis B virus, 30 percent to 40 percent of whom have the chronicform of the disease, are in SciClone's territory, she said.Vincent Simmon, president and chief executive officer of Alpha 1, toldBioWorld that the arbitration "overshadows the positives of the valueof thymosin alpha 1 in the treatment of hepatitis and other diseases. Westill maintain that even if we were to take away the royalty, we have adrug with a lot of potential in our area."The major issue for Alpha 1 in going forward is the efficacy of thedrug, for both companies. This is our product; it's the bread and butterfor both companies. We will be working to make sure there is a transferof technology efficiently to them. I hope any damage there is hasalready been done and we go forward from here."Slade, too, said SciClone would like to go forward amicably withAlpha 1, particularly since that company would be able to provide theproduct quicker than anyone with whom SciClone would contract withnow. But, she said, certain matters, including patent questions still needto be resolved _ by the companies or an arbitrator.SciClone (NASDAQ: SCLN) stock was up 50 cents per share Mondayto close at $17.50. Alpha 1 (NASDAQ:ALBM) fell $2 per share toclose at $8.

-- Jim Shrine

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